Peabody says 1Q results to hurt by lower prices

ST. LOUIS (AP) -- Peabody Energy Corp. said Friday that it expects a drop in coal prices and higher costs to result in "trough" earnings for the first-quarter, but said its results should improve as the year progresses.

The St. Louis-based coal producer said its first-quarter Australian costs are expected to be up about 10 percent, while pricing of metallurgical coal, used in steelmaking, is expected to be down from fourth-quarter levels.

Meanwhile Peabody expects its U.S. coal sales to fall by about 2 million tons as a result of lower market demand, while U.S. coal pricing is expected to be down about 5 percent.

The company noted that potential customers are increasingly switching to coal from natural gas as a result of rising natural gas prices, while seaborne coal markets are also starting to improve.

Coal producers have struggled this year as record-low natural gas prices prompted many utilities to use it instead of coal for fuel.

In addition, a mild winter earlier this year cut demand for electricity and heating, while the slower global economy eroded demand for steel. That hurt sales of metallurgical coal.

For the full year, Peabody expects capital spending to be about 50 percent lower than its 2012 target of $1 billion to $1.1 billion, while sales volumes are expected to fall to between 180 million and 190 million from the company's 2012 targets of 188 million to 192 million.

Full-year Australian costs are expected to be up about 5 percent, while depreciation, depletion and amortization costs will be up about 20 percent, the company said.

Peabody shares rose 84 cents, or 3 percent, to $28.46 in morning trading.